Mov Investment and Real Interest Rates

Intuition as to why high real interest rates lead to low investment and why low rates lead to high investment

In this tutorial, we begin thinking about the impact of real interest rates on planned investment and output. We then use this to help us plot the IS curve. We then think about how, assuming a fixed money supply, as there is more economic activity, people are willing to pay more for money (helps us plot the LM curve). Finally, we use the IS-LM model to think about how fiscal policy can impact both GDP and real interest rates. You should watch the Keynesian Cross tutorial before this one.

This video is part of the IS-LM Model and of the topic Income and expenditure - Keynesian cross and IS-LM model

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